The Five Keys to Value Investing by Jean-Jacques J. Dennis Jean-Jacques, who made his name as an investment analyst working with legendary value investor Michael Price, presents in the form of a clear framework a time-proven value investing strategy for identifying well-run companies, then investing only in those that are undervalued. Find out here how today’s best value investors:
The goal is to obtain adequate and consistent performance. Regardless of the performance of the general market, I am looking for a satisfactory return over time, based on the amount of risk taken.
Today price is important and value matters. Investing in what each corporation was made up of-ideas, products, and management with a specific set of business goals in mind.
Returns go to those who are best at analyzing the available information.
Know the economic reality versus the accounting reality.
Value investing opportunities:
1. Pure value opportunities, such as identifying significantly undervalued companies or well-run cyclical companies at the bottom of their cycles.
2. Event-driven opportunities, such as corporate restructuring and spin-offs
3. Bankruptcies, and mergers and acquisitions.
4. Search for the true value and the potential catalyst.
5. To begin your journey as a value investor requires sincere drive and hard work.
6. Reading Federal Filings is the center of your effort.
Value investing: The Mind Of The Value Investor
Good business + Excellent Price = Adequate Return over Time
Buy companies when their value is deeply discounted. Implementation is not so simple.
The art is in assessing a management team or identifying a good business.
Be an analyst: independent work, analytical thinking and a relentless work ethic.
Good value investors:
1. Exude emotional discipline
2. They possess a robust framework for making investment decisions
3. They apply original research and independent thinking.
What is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.
Value investing: The Need For Emotional Discipline
Controlling spontaneous reactions and not letting them guide one’s decision making is what having emotional discipline is all about.
Discipline is training oneself to act in accordance with a predetermined set of rules.
Lack of emotional discipline:
We often believe what we want to believe, and tend not to take into account what the facts dictate.
Short on courage, we at times lack the conviction from our own work.
We are often too short-term oriented.
Trading causes a loss through missing critical signals of asset deterioration or a larger, more meaningful investment.
Weak convictions can lead to herd mentality.
Investing is a patient game.
Investors pass through concern, complacency, and capitulation.
Value investing: Obtaining Emotional Discipline
1. have a disciplined framework
Investing is an individual sport with individual consequences. Your approach and the tools you use must all fit together. The delicate balance between the rigidity and flexibility of techniques and frameworks is the cornerstone in obtaining emotional discipline.
Value investing: The Seven Fundamental Beliefs
The world is not coming to an end, despite how the stock market is reacting.
Investors will always be driven by fear and greed, and the overall market and stocks will react accordingly. The volatility is simply the cost of doing business.
Inflation is the only true enemy. Trying to predict economic variables and the direction of the market or the economy is a waste of time-focus on businesses and their values, and remember belief.
Good ideas are hard to find, but there are always good ideas out there, even in bear markets. Especially in bear markets.
The primary purpose of a publicly traded company is to convert all of the company’s available resources into shareholder value. As shareholders, your job is to make sure that happens. Companies are also resource conversion organizations—often need a catalyst such a launch of a new product to the break-up of the company.
Ninety percent of successful investing is buying right. Selling at the optimal price is the hard part. As a result, value investors tend to buy early and sell early.
Use dollar cost averaging to get the best average price.
Volatility is not risk; it is opportunity. Real risk is an adverse and permanent change in the intrinsic value of the company. Stock price oscillates around value—has the company’s fundamentals changed.
Book can be found here The Five Keys to Value Investing